Other Steps To Consider Before the End of the Year

CalculatorThe following are some of the additional actions we should review before year end to see if they make sense in your situation.

The focus should not be entirely on tax savings. These strategies should be adopted only if they make sense in the context of your total financial picture.

Accelerating Income into 2014

Depending on your projected income for 2015, it may make sense to accelerate income into 2014 if you expect 2015 income to be significantly higher. Options for accelerating income include:

    • Harvesting gains from your investment portfolio;
    • If you own a traditional IRA or a SEP IRA, converting it into a Roth IRA and recognizing the conversion income this year;
    • Taking IRA distributions this year rather than next year;
    • Selling stocks or other assets with taxable gains this year;
    • If you are self employed with receivables on hand, trying to get clients or customers to pay before year end; and
    • Settling lawsuits or insurance claims that will generate income this year.

Deferring Income into 2015

There are also scenarios (for example, if you think that your income will decrease substantially next year) in which it might make sense to defer income into the 2015 tax year or later years. Some options for deferring income include:

  • If you are due a year-end bonus, asking your employer to pay the bonus in January 2015;
  • If you are considering selling assets that will generate a gain, postponing the sale until   2015;
  • Delaying the exercise of any stock options you may have;
  • If you are selling property, considering an installment sale;
  • Consider parking investments in deferred annuities;
  • Establishing an IRA, if you are within certain income requirements; and
  • If your employer has a 401(k) plan, consider putting the maximum salary allowed into it before year end.

To be continued…


About cozbycpa

Heather L. Cozby is a CPA on the South Shore and Cape Cod. The managing partner of Cozby & Company, LLC, Heather has the resources and experience necessary to provide quality professional services on a timely basis and at a reasonable cost. She specializes in tax planning & preparation; audit, review & compilation services; management advisory services; bookkeeping; and accounting. Her unique niche is in working with homeowners’ associations and condominium trusts, advising with rental real estate, and providing outsourced financial consulting for mid-sized companies. She is more entrepreneurial than most accountants, and offers the best of both worlds - providing the services of a larger firm while retaining the ability to connect with her clients on a personal level.
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